Why is deferral of unearned revenue a positive adjustment on

Why is deferral of unearned revenue a positive adjustment on the statement of cash flows?

Explain in moderate detail.

Also, Why is recognition of unearned revenue a negative adjustment on the statement of cash flows?

Explain in moderate detail.

Solution

In cash flow statement by indirect method, Cash from operations is reconciled with net income. Balance of cash in a cash flow statement does not equal profits of the company and cash flow is just a statement showing flow of cash in the period. Increase and Decrease in Current assets and Current liabilities are adjusted with operating income to get cash from operations.